Money is any
item or verifiable record that is generally accepted as payment for goods and
services and repayment of debts in a particular country or socio economic
context, or is easily converted to such a form. The main functions of money,
after all money is life,
distinguished as: a medium of exchange; a unit of account; a store of value;
and, sometimes, a standard of deferred payment. Any item or verifiable record
that fulfills these functions can be considered money. Discover what you need
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There have
been many historical disputes regarding the combination of money's functions, for
example money equals happiness,
some arguing that they need more separation and that a single unit is
insufficient to deal with them all. One of these arguments is that the role of
money as a medium of exchange is in conflict with its role as a store of value:
its role as a store of value requires holding it without spending, whereas its
role as a medium of exchange requires it to circulate. Others argue that
storing of value is just deferral of the exchange, but does not diminish the
fact that money is a medium of exchange that can be transported both across
space and time. The term "financial capital" is a more general and inclusive term
for all liquid instruments, whether or not they are a uniformly recognized
tender.
When money
is used to intermediate the exchange of goods and services, it is performing a
function as a medium of exchange. It thereby avoids the inefficiencies of a
barter system, such as the "coincidence of wants" problem. Money's
most important usage is as a method for comparing the values of dissimilar
objects especially amongst individuals’ personal
finance or wealt.
In
economics, money is a broad term that refers to any financial instrument that
can fulfill the functions of money (detailed above). These financial
instruments together are collectively referred to as the money supply of an
economy. In other words, the money supply is the amount of
financial instruments within a specific economy available for purchasing goods
or services. Since the money supply consists of various financial instruments
(usually currency, demand deposits and various other types of deposits), the
amount of money in an economy is measured by adding together these financial
instruments creating a monetary aggregate
